Increase in smartphone penetration, and advancement in internet connectivity and computer technology are the major factors driving the growth of the market.

On the basis of device type, the augmented reality and virtual reality market is categorized into AR devices and VR devices. Of the two, VR devices recorded larger share in the market, with a contribution of more than 60% in 2017. However, during the forecast period, the market for AR devices is expected to grow faster, witnessing a CAGR of 73.8%. The higher growth of this market is mainly attributed to the growing demand of the technologies from the tourism industry; for instance, the National Museum of Singapore uses AR devices to provide reality-enhanced tour of the museum, which has redefined the conventional museum experience for travelers.

On the basis component, the augmented reality and virtual reality market is categorized into hardware and software; between the two, the hardware category accounted for larger revenue in the market, valued at nearly 67% in 2017. However, the software component category is projected to witness higher growth during the forecast period.

On the basis of application, the augmented reality and virtual reality market is categorized into AR and VR applications. Consumer applications such as gaming, media, and entertainment, contributed over 30% of revenue in the market in 2017.

Market is expected to witness the fastest growth in Asia-Pacific (APAC)

During the forecast period, the augmented reality and virtual reality market in APAC is expected to witness a CAGR of 69%. Increase in investment in commercial and defense activities is expected to drive market growth in the region. AR applications are being developed which will provide map overlays of prominent landmarks for improving geographic awareness and enabling rescue teams with better navigation into difficult terrains. Similarly, the healthcare industry in the region is expected to be one of the most promising users of VR technologies and devices because of surging usage of VR in surgical training, live streaming of surgeries, patient monitoring, pain management.

Rising smartphone penetration is the key growth driver

AR and VR technologies are reaching out to the masses through different devices and platforms. Increasing penetration of smartphones and tablet computers among the consumers is providing a stable platform for augmented reality and virtual reality products. Additionally, smartphones can also be used as input devices for controlling the VR environment, especially for the virtual reality gaming applications. Hence, the increasing penetration of smartphones and tablet computers is leading to the growth of the augmented reality and virtual reality market.

Widespread potential for development of mixed reality offers immense growth opportunities in the augmented reality and virtual reality market

Mixed reality will be providing diversified opportunities to VR and AR manufacturers and content developers like interactive product content management by using 3D model of objects placed virtually in the real environment for users, for visualizing the real expected outcome and accordingly making changes in it. Simulation based learning allows interactive experiential learning under real environment. It offers connected enterprise solutions for completing a task where different team members can be networked in a shared virtual world, irrespective of their physical proximity in real world. This mixed reality is considered as the future of AR and VR technologies, allowing the manufacturers and content developers to expand to different domains which were earlier not possible with the use of any of these technologies individually.

Augmented reality and virtual reality market competitiveness

Technology giants are venturing into the augmented reality and virtual reality market through calculated strategic developments, such as the acquisition of Altspace VR, a social VR platform, by Microsoft; and Samsung electronics' acquisition of VRB, a startup involved in VR app development. Samsung, through innovation with Oculus VR, has also produced virtual reality devices for use, along with its top leading smartphones.

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